Manufacturing activity in the euro zone expanded at its fastest rate in 21 months in December, in line with the flash estimate published last month, but new orders growth slowed slightly, a survey showed today.
The final Markit Eurozone Manufacturing Purchasing Managers' Index for December rose to 51.6 from 51.2 in November, its highest level since March 2008.
That marked the third consecutive month the reading has been above the 50.0 level that divides growth from contraction. But the report was not all good news.
The new orders index slipped to 53.6 from a flash reading of 53.9 and down from a 27-month high of 53.8 in November.
"The rate of growth (in new orders) ... actually eased instead of accelerating as previously reported," Markit said in a release, noting the strongest gains in new orders were reported in France and Germany.
The output index rose to 55.1 last month from 54.8 in November, also slightly down from the flash reading of 55.2 published in the middle of December.
Markit said investment and consumer goods production across the euro zone accelerated in December, while production of intermediate goods slowed.
Overall manufacturing activity in Germany expanded at its fastest pace since May 2008, although slower than previously expected, while France and Italy also saw activity tick up from November.
Italian production saw its best performance in 27 months.
But it was a different story in Spain, where manufacturing has contracted for over two years and did so at a faster pace last month than in November. Spain also experienced the sharpest rate of order book contraction in the euro zone, Markit said.
Spain and Britain were the only two major Western economies that didn't grow in the third quarter of 2009.
The European Central Bank has slashed interest rates to a record low of 1 per cent and adopted a loose monetary policy in a battle to pull the bloc out of recession.
The economy had shrunk for five consecutive quarters but returned to growth of 0.4 per cent in the July-September period and economists expect growth of 0.5 percent in the fourth quarter.
Markit said inflationary pressures are increasing with the input prices index at its highest in over a year. The prices charged index reached a 13-month high but remained below 50, indicating firms are still having to cut prices on their finished goods.
Unemployment remains a concern for the ECB. The factory employment index showed the nineteenth straight month of job losses, although at a slower pace than in November and the mildest rate in 15 months.
Reuters